Having worked around financial crimes for a number of years, I noticed they seemed to be on the rise.
One reason for this is technology, which grows more rapidly than laws designed to protect us from it.
Although the blog is a resource to educate people on identity theft, it also strives to educate the common person on the rapidly growing problem of crimes enabled (made too easy) by technology and the Internet.

Friday, June 20, 2008

Mortgage crooks arrested nationwide in FBI sweep!

Recently, the FBI hinted that a lot of criminals might be getting arrested for contributing to the mortgage meltdown.

It appears that they are now backing up their words with some action.

From the FBI press release:

From March 1 to June 18, 2008, Operation Malicious Mortgage resulted in 144 mortgage fraud cases in which 406 defendants were charged. Yesterday, 60 arrests were made in mortgage fraud-related cases in 15 districts. Charges in Operation Malicious Mortgage cases were brought in every region of the United States and in more than 50 judicial districts by U.S. Attorneys’ Offices based upon the law enforcement and investigative efforts of participating law enforcement agencies. The FBI estimates that approximately $1 billion in losses were inflicted by the mortgage fraud schemes employed in these cases.

Most notably two Bears and Sterns executives were taken off the job in handcuffs:

Today, the U.S. Attorney’s Office for the Eastern District of New York announced an indictment against two senior managers of failed Bear Stearns hedge funds, charging Ralph Cioffi and Mathew Tannin with conspiracy, securities fraud and wire fraud. Cioffi was also charged with insider trading. The indictment alleges that the managers marketed the two funds as a low risk strategy, backed by a pool of debt securities such as mortgages. The indictment alleges that by March 2007, the managers believed the funds were in grave condition and at risk of collapse, but made misrepresentations to stave off investor withdrawal. The funds subsequently collapsed in the summer of 2007 resulting in approximately $1.4 billion in losses to investors.

There is no doubt that a lot of dishonest and very greedy people took advantage of the public at large.

Some people are comparing the mortgage crisis with another economic crisis, where only a rumor of fraud has been suggested thus far.

One of the reasons housing costs skyrocketed and them plummeted was a lot of property flipping. "Many experts blame the US real estate bubble in 2004 and 2005 on investor speculation and "irrational" flipping. Very low interest rates were a root cause, but speculation and flipping compounded the bubble," according to Wikipedia.

Most of this was based on speculation that the price would keep going up.

Now it is rumored that a key reason energy prices are skyrocketing is speculation in the oil market. Huge chunks of oil are bought on paper and paid for with credit. In a lot of instances, the oil is never even actually delivered. The result is that we hear that the price is being driven up because of demand.

Bottom line: Oil is being artificially marketed, and because we all need oil to live, we must pay what the industry dictates because there is no competition.

Add to this the oil speculators. These are people who buy oil contracts for delivery in the future. Only they don't really want the oil. They want the paper.

Speculators bet that oil prices will go higher, and if they do, they sell the paper to concerns that will actually take the oil. If prices go lower, the speculators lose their money.

But get this. The speculators don't have to pay cash to buy the paper contracts. They use credit, so it is easy to play this Las Vegas-type game.

Being just an average person, this leads me to believe that we might see (my opinion) some scandals come out in the future in the energy market, just as we are seeing them now come out in the mortgage meltdown now.

At the end of his talking point, Bill lamented that any help might be a long way off because of all the special interests the oil industry has in Washington.

Interestingly enough, a scandal is now brewing about two prominent Washington types getting sweetheart deals from a mortgage company, while all the real estate speculation was ongoing. The latest is that this money will be given to charity, but it illustrates Bill's last thought on why relief for the average person in the oil crisis might be a long way off.

Granted this is a speculation on my part, but it doesn't appear that it's illegal to speculate, does it? Well I suppose, as long as the person doing the speculating isn't ripping the general public, it isn't.

Given that the U.S. Commodity Futures Trading Commission is hosting a International energy market manipulation conference to look into this, perhaps we will hear a rumor that the authorities are hot on the trail of this issue, also.

Maybe some wishful thinking on my part, but remember I'm only speculating!